Denne Posted January 4, 2010 Report Share Posted January 4, 2010 I have a client that purchased a home from a trust. It was his Grandmother's Trust..... I don't feel he is entitled to the $8000 credit. His Realtor claimes he is based on the fact he didn't purchase directly from a family member. Any idea where the Realtor is reading that I am not? The TP rented this house from the trust for a year before he was offered a pretty good purchase price. I am getting the idea that the Realtor is using that information in his stand that the $8000 credit is available. Thanks for your posts on this subject. Quote Link to comment Share on other sites More sharing options...
TAXBILLY Posted January 4, 2010 Report Share Posted January 4, 2010 Is he a beneficiary of the trust? taxbilly Quote Link to comment Share on other sites More sharing options...
Denne Posted January 6, 2010 Author Report Share Posted January 6, 2010 Is he a beneficiary of the trust? taxbilly He is not a beneficiary of the trust. His mother and uncle are however. That is why I was viewing it as a purchase from a family member. It sounds like it may make a differnce if he is not a direct beneficiary, perhaps?? Thanks for your reply. I await your view after this additional information. Quote Link to comment Share on other sites More sharing options...
Denne Posted January 7, 2010 Author Report Share Posted January 7, 2010 I was just looking for a reply.... anyone have some answers on this subject? Thank you ;~) Quote Link to comment Share on other sites More sharing options...
TAXBILLY Posted January 7, 2010 Report Share Posted January 7, 2010 This is just my opinion but since the two beneficiaries are relatives I would tend to lean towards no but I have not researched it. taxbilly Quote Link to comment Share on other sites More sharing options...
Denne Posted January 8, 2010 Author Report Share Posted January 8, 2010 You feel like I do. I have been trying to find something that specifically tells how the purchase from a Trust would be handled. So far no luck however. Quote Link to comment Share on other sites More sharing options...
TAXBILLY Posted January 8, 2010 Report Share Posted January 8, 2010 Other tax forums have discussed this issue. One example was a person who inherited 1/3 of his mother's home when she passed away. The other 2/3 was owned by his two sisters. The feeling was he would be eligible for 2/3 of the credit since he was buying the 2/3 from his siblings who are not direct descendants. taxbilly Quote Link to comment Share on other sites More sharing options...
jainen Posted January 8, 2010 Report Share Posted January 8, 2010 >>specifically tells how the purchase from a Trust would be handled<< A trust is just a separate entity, no different than buying from a corporation or an estate. The related party rules don't go very deep. Being related to a beneficiary should not be a problem. IRS used to have an FAQ page on this credit, which said you can even buy the property from your spouse's parents! [i can't recommend that, though, for non-tax reasons--your in-laws will still consider it to be their own house they can visit anytime.] Quote Link to comment Share on other sites More sharing options...
elfling Posted January 8, 2010 Report Share Posted January 8, 2010 Interesting that I posed a similar question to an IRS auditor just yesterday. [some may feel uncomfortable having input from such a source but I have no reason to doubt this man's word.] My client's situation was a little different: mother's brother (his granduncle) died; uncle left a house to his own son (my client's cousin); cousin did not want/need another house so he sold it to my client. No matter what IRS source I searched I was unable to get a specific listing of who is or is not either an ancestor or a lineal decendant. The auditor explained that in the case of the Home Buyers Credit the persons who would exclude one from the credit are specifically these: TPs ancestors being mother, father, grandparent, great grandparent, etc. going backward in history. TPs lineal decendents being child, grandchild, great grandchild, etc. going forward in history. And TPs immediate siblings, i.e. brother, sister, half-brother, or half-sister. In my client's situation it was clear that the exclusion did not apply. Neither the uncle nor the cousin counts. In regards to the trust in this post, I would steer clear as it was a grandmother's. Regardless of what steps it took along the way, the house has gone from grandmother to grandchild. Gaining the $8K just to have to pay it back when/if IRS says it was not allowed could get nasty. Elfling Quote Link to comment Share on other sites More sharing options...
Denne Posted January 11, 2010 Author Report Share Posted January 11, 2010 Interesting that I posed a similar question to an IRS auditor just yesterday. [some may feel uncomfortable having input from such a source but I have no reason to doubt this man's word.] My client's situation was a little different: mother's brother (his granduncle) died; uncle left a house to his own son (my client's cousin); cousin did not want/need another house so he sold it to my client. No matter what IRS source I searched I was unable to get a specific listing of who is or is not either an ancestor or a lineal decendant. The auditor explained that in the case of the Home Buyers Credit the persons who would exclude one from the credit are specifically these: TPs ancestors being mother, father, grandparent, great grandparent, etc. going backward in history. TPs lineal decendents being child, grandchild, great grandchild, etc. going forward in history. And TPs immediate siblings, i.e. brother, sister, half-brother, or half-sister. In my client's situation it was clear that the exclusion did not apply. Neither the uncle nor the cousin counts. In regards to the trust in this post, I would steer clear as it was a grandmother's. Regardless of what steps it took along the way, the house has gone from grandmother to grandchild. Gaining the $8K just to have to pay it back when/if IRS says it was not allowed could get nasty. Elfling Thank you for your comment here. I do think my client's Realtor was not looking at it correctly. I am going to advise him to stay clear of claiming the credit. Wish it was spelled out more clearly about purchasing from a Trust, but the fact that the house was his grandmothers first really seems like a family transfer to me too. Quote Link to comment Share on other sites More sharing options...
TAXBILLY Posted January 11, 2010 Report Share Posted January 11, 2010 Maybe the instructions will be clearer with the latest version of the form which should be official soon. taxbilly Quote Link to comment Share on other sites More sharing options...
taxguy057 Posted January 13, 2010 Report Share Posted January 13, 2010 >>specifically tells how the purchase from a Trust would be handled<< A trust is just a separate entity, no different than buying from a corporation or an estate. The related party rules don't go very deep. Being related to a beneficiary should not be a problem. IRS used to have an FAQ page on this credit, which said you can even buy the property from your spouse's parents! [i can't recommend that, though, for non-tax reasons--your in-laws will still consider it to be their own house they can visit anytime.] IRC reads "that if purchased from a related person..." I have to agree with jainen to say that the "trust" is a separate entity and the house may be now deeded in the name of the "trust" which now in capacity is the fiduciary so has all legal rights to manage and dispose of the property according to the wishes of the owner of that trust. If I'm not mistaken, He's buying from the trust, not the uncle/aunt. Quote Link to comment Share on other sites More sharing options...
GeneInAlabama Posted January 13, 2010 Report Share Posted January 13, 2010 If the mother had sold the house to a complete stranger, and then the son later bought the house from the stranger, he would not be buying from a related party. Since a trust is a separate entity, would that not be the same as buying from a stranger? Since the answer is not clear cut, I think I would advise the client to claim the credit and put the money in the bank for 3 years in case the IRS determined that it was claimed in error. Quote Link to comment Share on other sites More sharing options...
TAXBILLY Posted January 13, 2010 Report Share Posted January 13, 2010 Isn't the mother and uncle the owners of the grandmother's trust? >>A trust is just a separate entity, no different than buying from a corporation or an estate.<< What if the taxpayer is buying the residence from his solely owned S-Corporation? Would they be related parties? taxbilly Quote Link to comment Share on other sites More sharing options...
taxguy057 Posted January 14, 2010 Report Share Posted January 14, 2010 Isn't the mother and uncle the owners of the grandmother's trust? >>A trust is just a separate entity, no different than buying from a corporation or an estate.<< What if the taxpayer is buying the residence from his solely owned S-Corporation? Would they be related parties? taxbilly Yes! If he owns more than 50% of the shares and is not entitled to take the credit.... Sorry! :( Quote Link to comment Share on other sites More sharing options...
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